Feb. 28 (Bloomberg) -- German unemployment unexpectedly
fell in February amid signs that Europe’s biggest economy is
returning to growth after a contraction at the end of last year.

The number of people out of work fell a seasonally adjusted
3,000 to 2.92 million, the Nuremberg-based Federal Labor Agency
said today. Economists had predicted unemployment to be
unchanged, the median of 33 estimates in a Bloomberg News survey
showed. The adjusted jobless rate held at 6.9 percent this month
after the January rate was revised up from an initially reported
6.8 percent.

The Bundesbank said last week it expects the economy to
expand in the current quarter after contracting 0.6 percent in
the final three months of last year. As the outlook brightens,
business confidence jumped to a 10-month high this month and
investor optimism surged to the highest in almost three years.

“The labor market seems to be coping well with the plunge
in activity last autumn,” said Eckart Tuchtfeld, an analyst at
Commerzbank AG in London. “Strong leading indicators for the
economy suggest that unemployment will continue to trend
downwards in 2013 while employment will increase.”

The euro declined 0.2 percent against the dollar and was at
$1.3115 as of 11:33 a.m. London time.

New Jobs

Companies including BASF SE and Fresenius SE expect
business to improve in 2013. European Aeronautic, Defence &
Space Co. said it’s looking to hire 5,000 people this year
globally and is “redoubling” its efforts to take on engineers
in Germany.

The German economy may grow 0.3 percent this quarter after
shrinking in the final three months of last year, the Berlin-based DIW economic institute said yesterday, predicting growth
will be led by exports and domestic demand.

Consumer confidence will rise for a second month in March,
GfK SE said. The “turning point in economic prospects” for
consumers has been reached, it said.

The Ifo institute’s business climate index climbed to 107.4
from 104.3 in January. That’s the biggest increase since July
2010 and the fourth straight monthly gain. Earlier, the ZEW
gauge of investor sentiment rose to the highest in almost three
years.

Slowing Inflation

Separately today, five German states reported that
inflation slowed in February. Economists forecast that the
national inflation rate, calculated using a harmonized European
Union method, fell to 1.7 percent, the lowest in more than two
years. The Federal Statistics Office will release that report,
based on data from six states, at 2 p.m.

In the euro area, inflation cooled to 2 percent in January
from 2.2 percent in December, the European Union’s statisticss
office said. That’s in line with an initial estimate on Feb. 1.
Consumer-price growth probably slowed to 1.9 percent this month,
economists said before the statistics office publishes its
estimate tomorrow.

Germany’s harmonized jobless rate was 5.3 percent in
December, according to the Organization for Economic Cooperation
and Development. That compared with 7.8 percent in the U.S.,
10.6 percent in France, 11.2 percent in Italy and an EU average
of 10.7 percent.

Europe Outlook

While Germany’s unemployment rate is holding near a two-decade low, France’s stands at the highest in 13 years and youth
unemployment in Germany’s biggest western neighbor is almost
double the national rate.

Seven euro-area economies are expected to shrink this year,
with the Netherlands joining Italy, Spain, Portugal, Greece,
Cyprus and Slovenia, the Brussels-based European Commission said
Feb. 22. Gross domestic product in the 17-nation euro region
will fall 0.3 percent in 2013, it said.

In Spain, data today showed the recession deepened more
than previously estimated in the fourth quarter. GDP fell 0.8
percent, more than the 0.7 percent drop estimated on Jan. 30.

Germany’s foreign sales have cooled in the wake of the debt
crisis, with exports rising in only two months in the second
half of last year. Exports gained 0.3 percent in December,
falling short of an average economist estimate of 1.4 percent.

While measures of economic confidence in Europe have risen,
European Central Bank President Mario Draghi has said he expects
further weakness in the region’s economy in the first half of
the year followed by a “very gradual” recovery.

Swiss Growth

Elsewhere today, Switzerland’s economy unexpectedly grew
0.2 percent in the fourth quarter, boosted by consumer spending.
Economists in a Bloomberg survey had forecast stagnation. In
Asia, South Korea’s industrial production unexpectedly declined
in January, while output in Japan rose for a second month.
Australian business investment fell last quarter.

The U.S. Commerce Department will publish its second
estimate of fourth-quarter GDP later today after initial data
showed the economy shrank at a 0.1 percent annual rate. It may
revise the data to show an increase of 0.5 percent, according to
a Bloomberg survey, as more recent figures showed a narrower
trade deficit, more construction spending and a pickup in
business investment.